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TMI Blog1996 (9) TMI 165X X X X Extracts X X X X X X X X Extracts X X X X ..... proceedings, it was noticed that the assessee had made certain sales to a sister concern, M/s. Shreejee Traders, Lucknow in which the wives of the directors were partners. Such sales were Rs. 27,74,688 for 445.005 M.T. The concern had same place of business as the assessee. It was further found that no actual delivery of the goods was made to this concern. The delivery was made through the challans from the factory of the assessee directly to the ultimate buyer. However, bills for these goods were raised by the assessee on M/s. Shreejee Traders, who in turn, raised bills on the ultimate buyer. The assessee was asked to explain these transactions. It was submitted that they were in normal course of business. It was general practice in the tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order under section 143(1) in the case of M/s. Shreejee Traders and also copy of sales-tax assessment order. This showed that it was the genuine concern as accepted by these authorities. 7. The Bench invited attention of the learned counsel to a copy of Trading and Profit and Loss account of M/s. Shreejee Traders in the Paper Book according to which, the sales of iron and steel were only Rs. 36,48,565 for the year. There was no opening or closing stock for these goods. Compared to this figure, the sales of Rs. 27,74,688 by the assessee to this concern were very substantial and a large percentage and not insignificant. Attention was also invited to the figures in the Profit and Loss account according to which the net profit for the ye ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ard. 10. The learned counsel thereafter submitted that similar disputes had arisen in other years. In assessment year 1986-87, the CIT(A) had set aside the matter to the file of the Assessing Officer as per paras 6 and 7 of his appellate order. Thereafter, the Assessing Officer had accepted the explanation of the assessee in fresh assessment dated 28-7-1992 in para 2.25 of the assessment orders. 11. Our attention was also invited to the assessment order for assessment year 1989-90, where similar, dispute was discussed, but the assessee's explanation was accepted and no addition was made in para 5 of the assessment order dated 19-12-1991. The learned counsel submitted that when the department had accepted the explanations for those years ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... clearly prohibited in Rule 29 of the Tribunal Rules. The learned Departmental Representative further emphasised that there was nothing to show that M/s. Shreejee Traders had done any work like procurement of orders etc. and were really in the nature of a benamidar of the assessee-company. He emphasised again that the whole transaction was only a device to evade tax and the addition should be confirmed. 15. We have considered the rival submissions carefully. We agree with the submission of the learned Departmental Representative that the principle of the res judicata does not apply in income-tax proceedings. Indeed, if this principle were to apply, it would operate against the assessee and not in favour of the assessee as contended by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... thers. The additional evidence is, therefore, rejected. 18. The contention of the learned counsel that section 40A(2)(b) is not applicable, is accepted. This section relates to disallowance of expenditure under certain circumstances. However, there is no such dispute here. The reference to the section is quite superfluous since the Assessing Officer has not proceeded to disallow any expenditure, but has made an addition on totally different grounds, which we will now examine. 19. The Assessing Officer has clearly held that the transactions were a device for reduction of income and avoidance of tax in the hands of the company. The CIT(A) has also held that "the device adopted by the appellant-company is obviously colourable". The law on ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... judicial benediction." 20. We may add further that the observation on tax avoidance in A. Raman Co.'s case and CIT v. B.M. Kharwar [1969] 72 ITR 603 (SC) were disapproved by the Supreme Court in the above judgment. 21. The facts of the present case should now be examined in light of the above guidelines of the Supreme Court. The assessee-company is a manufacturer and produces re-rolled bars, angles etc. It has a fairly large turnover of about 2.17 crores in this year. M/s. Shreejee Traders is a small trading firm having a turnover of only Rs. 36.48 lacs in this year. The purchases were Rs. 34.74 lacs, most of which were from the assessee-company, being Rs. 27.74 lacs. This firm was situated in the same premises as the assessee-company ..... X X X X Extracts X X X X X X X X Extracts X X X X
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